15 MORE tax tips from the experts

Last week SmartCompany brought you 15 tax tips from the experts, but with the end of the financial year in sight we thought just 15 weren’t enough.

So, to start your financial year well-capitalised and stress-free, we’ve brought you another 15 tax tips to keep your business going during the downturn.

Write off that stock, get a deduction

Several businesses are having troubles with their stock levels during the downturn, with some cutting back inventories and, by consequence, missing out on potential sales.

For those businesses suffering cashflow issues relating to inventories, Mark Morris, senior tax counsel at CPA Australia, says businesses can claim a deduction for stock that has lost value over the past year.

“If your quoting stock’s value is less than your opening stock you get a deduction for the difference. That could be important to a company with bad cashflow. You have to prove your stock is obsolete, and you would have to pay more tax next year, but you get savings on this year’s tax.”

Gifts and donations

If any charitable gifts or donations have been given by your businesses, they must ensure they are listed as a deductable gift by the tax office to claim a deduction. But businesses should be aware that donations shouldn’t be made from entities that will expect to incur a loss, and double-check that the entity receiving the donation is a deductible gift recipient for tax purposes.

Repairs and maintenance

While there isn’t much time left before 30 June, the experts recommend a business should bring forward any spending on repairs and maintenance to claim a deduction.

But Pitcher Partners partner Chris Hope reminds businesses that repairs and maintenance are defined by the ATO as bringing an asset back to its original condition. Any improvements beyond that may be eligible for deductions over time, but not up-front in the current financial year.

Frequent flyer points

Entrepreneurs will often earn frequent flyer points for travelling on business, but Deloitte’s employment taxes partner Frank Klasic says businesses should avoid seeking extra points by using a credit card.

“Earning points is OK, there’s no tax consequence of that, but what companies need to know is that sometimes there might be situations where people earn points through non-commercial arrangements. Sometimes people accumulate points through a loyalty card, and they might accumulate points by putting a bill onto their credit card – that does create income tax or FBT issues. It’s timely to revisit travel policies.

Realising capital gains and losses

Alan McKeown, Prosperity Advisers’ chief executive, says that for investors or anyone with a self managed superfund should review their portfolio carefully before the end of the year. “If there are shares thinking about selling at a loss, they should sell by 30 June,” he says.

Chris Hope recommends deferring the realisation of a capital gain if:

• The asset has not been held for 12 months and would otherwise be eligible for the 50% discount rule.
• You expect to record a capital loss in a later income year.
•  The exchange of contracts is likely to occur before 30 June, and can be deferred until after 30 June.

Investors should consider realising a capital gain if you have already realised a capital loss or have a capital loss from a previous year. You can gain small business capital gains tax concessions if you disposed of a CGT asset during the 2008-09 year.

Salary sacrificing

Salary sacrificing some of your income into a retirement account is an effective way to maximise superannuation, but now is a good time to consider salary sacrificing for other assets, such as the purchase of motor vehicles or equipment. Check with employers on what type of assets for which they would be willing to offer a salary sacrificing plan.

Careful with director’s fees and staff bonuses

These experts recommend that businesses give special attention to director’s fees and staff bonuses – two topics on which the ATO will be keeping a watchful eye. 

“Ensure shareholder’s and director’s meetings have been held prior to 30 June, 2009 to ratify the payment of director’s fees and staff bonuses and that these decisions have been documented and therefore committed to prior to 30 June, 2009,” Chris Hope says.

Trust distributions

Trust distributions are another topic that should be given special attention during the current economic climate, these experts say.